Amazon.com Inc. (AMZN) is making headlines today as it launched its 20th Anniversary “Prime Day” sale. The online retail giant touted the event as bigger than Black Friday, but it looks like the sales aren’t living up to the hype. Is this a sign that Amazon struggling, or is now a good time to buy AMZN shares on the dip? Find out today.
We all know Amazon.com. This is the biggest online retailer out there, where you can buy just about anything you can think of and have it delivered to your home in just a few days. From its humble beginnings as an online bookseller, Amazon’s current size and status is a testament to its ability to execute. The company currently employs over 117,000 full-time employees and is based in Seattle, Washington.
However, the online retailer has had a bit of an uphill battle over the past year. Amazon share prices took a hit in January 2014, right after hitting $400. It wasn’t until January of this year that the stock finally found some momentum. Amazon share prices are now well above $400, but there’s still a lot of work to be done. The fact is that Amazon has struggled to meet analysts’ expectations; Amazon has posted double-digit earnings misses for two of the past four quarters.
This quarter, Amazon is expected to post a loss of $0.14 per share, which is an improvement over the $0.27 loss per share recorded in the year ago quarter. Meanwhile, the company is expected to post 15% annual sales growth for this quarter. The other slightly good thing about Amazon’s report is that this week, analysts revised their EPS estimates higher from -$0.16 to -$0.14. While the consensus estimate is still negative, it’s good to see the gap get narrower.
Before you buy any stock, you should always run it through my free Portfolio Grader ratings system. Of the eight fundamental metrics I graded this company on only four received solid grades. Analyst earnings revisions earned an A-grade, while sales growth, earnings momentum, and earnings surprises all earned B-grades. Amazon scored lackluster C-grade for cash flow and D-grade for return on equity. As for the other metrics, AMZN outright failed with F-grades for operating margin growth and earnings growth. And while AMZN’s buying pressure is solid, earning a B for its Quantitative Grade; the stock’s Fundamental Grade clearly needs some more work, earnings a C-rating.
Overall, AMZN is a B-rated (Cautious Buy). Amazon’s been rated as buy in Portfolio Grader since April 2015; before that the company was rated as a hold for three-months, and then a sell for another six-months. So, while the company is clearly making strides to improve, I would hold off on buying shares until the fundamentals improve a little more.